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File No.APPL-COMMOCEXl930/2019-GST - APL-CHD , I

N

OFFICE OF THE COMMISSIONER (APPEALS),

Cfll4Y{li4 3lPIffi (31 tf1 {Ii ), CENTRAL GOODS & SERVICES TAX

COMMISSIONERATE, CHANDIGARH,

~q~~, ~1~"dI1{14, ~tl~l!t) C. R. BUILDING, PLOT NO. 19, SECTOR 17- C,

CHANDIGARH,

{1151fC4 ~, ~ t 19, ~ 17-~,

~Jl~I!t) PH. 0172-2720240. a~q;H-0172-

2720240

CJ:: C No. 69/A1s+1CHD/2018-19 ~ ~ g-4 ~ Appeal No. 69/A1ST/CHD/2018-1~1-34 ~ ~

ORDER-IN-APPEAL I+-3

Order-In-Appeal No.: CHD-EXCUS-001-APP- -2019-201 Dated: 1s-1'\ 1 ( ;

The present proceedings have emanated from the order dated 24.03.2014 issued by the Hon'ble High Court of Punjab and Haryana, Chandigarh in the CEA no. 106 12013 filed by the MIs Zeto Engineers Pvt. Ltd., Unit-II, Industrial Area , Phase-I , Chandigarh (herein after 'the Appellants'). The Hon'ble Court while remanding the case ordered that "a sum of Rs. 1.5 lacs be deposited as a condition precedent for hearing of the appeal by the Commissioner (Appeals) which would meet the ends of justice." Further, the Court has held that "In the interest of justice, we aI/ow the appel/ant to deposit the amount of Rs. 1.5 lacs

£~,'t?t~0.04.2014. It is directed that if the appel/ants in the present case d~posit the ~~,\I' ., amount of Rs. 1.5 Lacs by 30.04.2014, the appeal shall be heard on ment."

, 1.2 In this regard it is observed that the Appellants had fulfilled the conditions 1<:0<3'<" "i' lai~ if) the above said remand order by way of depositing the said amount of Rs. ~1~~acs vide GAR 7 Challan dated 30.04.2014. Therefore, the case is being

- ta-Ken up for decision on merits.

2. Briefly stated the facts of the case are that a show cause notice was issued to the Appellants which was adjudicated vide q-I-o No. 23/CE/ADC(P&V)/CHD/2003 dated 29.04.2003 whereunder the demand of Rs. 3,44,398/- alongwith equal penalty was confirmed against the Appellants and PP of Rs.75,OOOI- was also imposed on Sh Amrik Singh (Appellants No.2). The Appellants preferred an appeal with the Commissioner (Appeals) who vide Order­ In-Appeal No. 726--727/CE/CHD/2003 dated 30.07.2003 set aside the Order-In­ Original dated 29.04.2003. The revenue went in Appeal before the CESTAT

File NO.APPL-COMMOCEXl930/2019-GST - APL-CHD

against the Order-In Appeal dated 30.07.2003 which was dismissed vide Final order dated 05.02.2004. The revenue further filed an Appeal before the Hon'ble Punjab & Haryana High Court who vide order dated 21.08.2008 in CEA No. 36/2005 remanded the case back to the original adjudicating Authority. In compliance to the same the adjudicating authority i.e. Additional Commissioner (Audit), erstwhile Central Excise commissiOneraj' C~andigarh-I, adjudicated the case afresh and vide Order-In-Original No. 62/CE/ADC(Adj)/2010-11 dated 31.03.2011 confirmed the demand and imposed equal penalty; the Appellants again preferred an Appeal with the Commissioners(Appeals) who vide interim order dated 23.04.2012 directed them to deposit an amount of Rs.50,0001- towards duty confirmed and waved off the requirement of pre-deposit of the remaining amount of duty, interest and penalty. The appellant filed application for modification of order dated 23.04.2012 which was dismissed vide modification of stay order dated 13.07.2012 by the Commissioner (Appeals). Since the party failed to deposit the above said amount of Rs. 50,0001-, therefore, the appeal was dismissed vide Order-in-Appeal dated 07.08.2012 by the Commissioner (Appeals). Feeling aggrieved, the Appellants again took the matter before the Tribunal who vide Final Order No. A/55872-55875/2013-EXlBD dated 19.03.2013 dismissed the Appeal and upheld the Order-in-Appeal dated 07.08.2012, further, the Appellants filed CEA No. 106/2013 before the Hon'ble Punjab & Haryana High Court who vide Order referred to in Para -1 above remanded the case back to the Commissioner (Appeals) with the condition of pre-deposit elaborated in Para-1 above. The interim order dated 24.03.2014 and consequential order- in- appeal dated 07.08.2012 both passed by the Commissioner (Appeals) and Final order dated 19.03.2013 by the Tribunal were also dismissed by the Hon'ble Court.

3. The issue involved in the case is that the Appellants were engaged in the manufacture of Tractor parts and Engine Parts, (referred to as "OE Parts") falling under sub-heading 8708.00, 8433.90 of the Central Excise Tariff Act, 1985 (5 of 1986).

3.1 That an intelligence was gathered that some manufacturers of OE parts (hereinafter referred to as Vendors) were fraudulently availing Modvat Credit on GP Sheets which was neither an input nor it was used for the manufacture of OE parts; that the modus operandi was that the inputs namely H.R/C.R. Sheets

-:; specified by the Original Equipment manufacturers (Such as MIs. Punjab Tractors ,/" c~d.~ MIs H.M.T. Ltd., Railway Coach Factory and Maruti Udyog Ltd. In short OE !~: 'Manufacturer) as raw material for the manufactures of OE parts was obtained by

; M ' the vendors from grey market and GP Sheets purchased by them from the ~>" ,registered dealers were not used and were clandestinely sold in the market to its

main users such as small scale manufacturers of Air Conditioners. Room Coolers, ,-Soges?and Cabinets etc, without reversal of Modvat credit taken on it; that this was conveniently possible as the user industry of GP Sheets hardly came under the category of duty paying sector and as such they never required invoices to take any Modvat Credit and that the vendors had resorted to this illegal activity in order to avail higher Modvat Credit as GP Sheets being costlier than HR/CR Sheets and were chargeable to higher duty as compared to HRiCR Sheets.

3.2 That in pursuance to the above information the Central Excise Preventive staff of Chandigarh visited the factory premises and scrutinised the records i.e. RG-23A Part I & II found that the Appellants had been availing Modvat Credit on

File No.APPL-COMMOCEX1930/2019-GST - APL-CHD

GP Sheets, however, on taking round of the factory, it was noticed that none of the OE parts lying in stock with Appellants were manufactured out of GP Sheets and that no stock of GP Sheets as such or in the form of scrap generated in the process of manufacture of OE parts was found in the factory premises of the Appellants.

3.3 That from the statements of Sh. Amrik Singh, Proprietor of the Appellant firm it was observed that they were engaged in the manufacture of Tractor parts and Engine parts as declared in their declaration filed under Rule 173-B of the Central Excise Rules, 1944 (here-in-after referred to as the Rules), that they availed Modvat Credit on all the inputs for which they had filed Modvat declaration under Rule 57 -G that they had been manufacturing tractor parts as per the drawings and specification given by MIs PTL, MIs Swaraj Engine Ltd.,(SEL), and MIs HMT, Pinjore; that they did not have any stock of GP Sheets in process or in balance semi finished or finished goods and waste & scrap from GP sheets and that they did not have any evidence except the invoices. That as per the drawings the specified raw material was hot rolled sheets and cold rolled sheets for manufacture of sheets metal components, that G.P. Sheets had not been specified as the raw material, that accordingly they had not used G.P. Sheets in manufacture of tractor partsl Engine Parts. That although the specified material was HRICR sheets they used GP sheets in some of the components namely cartage assembly, bonnet assembly Itop cap, main body of air cleaner assembly and that the thickness of sheet used in the manufacture of air cleaner was 0.8 mm, Top cap 0.6 mm and main body & Bowl assembly 0.85 mm; that he had looked after all the production, clearance, purchase and other related matters of the unit for the last five years.

3.4 That on scrutiny of the records it was revealed that the complete description of the goods were not mentioned on the purchase invoices of GP Sheets; for instance, the description of the goods was mentioned as SheetlGP Sheets without indicating the dimensions such as thickness, width and length etc. of the material sold. It was further revealed that the Appellants had taken Modvat Credit on GP Sheets on the basis of invoices issued by the Registered Dealers, namely, MIs Rakesh Steel 182/53, Industrial Area, Phase-I, Chandigarh, MIs TCA Steels, 342,

~ J r:id l.'Area , Phase-I, Chandigarh, MIs SLM Steels, 182/53, Indl. Area, Phase-I, ,:Chaftdigarh MIs G.M. Metal Inds. , 182/39, Indl. Area, Phase-I, Chandigarh and t~ MIs Pawan Steels, 342 , Indl. Area, Chandigarh.

~ 3.5 ~ From the enquiries made from the above said Registered Dealers who had l) issuedInvolces of GP Sheets to Appellants on the basis of which the latter had availed' the Modvat Credit it was gathered that they purchased material mostly from CITCO, SAIL, Tata Iron & Steel Co. Ltd., Stockyard at village Dariya Chandigarh (in short 'TISCO') Himachal State Small Industries & Export Corporation (in short "HPSSIC') Nippon, MIs Ambika Foundry & Fabricators, 214, Sector 29-0, Chandigarh (in short Ambika), MIs G. M. Metal Industrial area, Chandigarh (in short G.M.) and MIs Atul & SLM Steels; that mostly the purchase invoices received by the Regd. Dealers contained the full particulars i.e. name of the goods (GP Sheets), its thickness and other dimensions, tariff heading, value of the goods and Central Excise duty involved I paid and that the Registered Dealers were not mentioning the thickness and other dimensions of GP sheets in their sale invoices. They were mentioning the description of goods in some of their

File No.APPL·COMMOCEXl930/2019·GST· APL·CHD

sale invoices as Sheets, the material sold was GP sheets; that no material other than GP Sheets was sold by them under those invoices; that they were not mentioning on the sale invoices the thickness of GP Sheets sold by them to different buyers.

3.6 From enquiries made from the above said Original Equipment (OE) manufacturers it was gathered that the main raw material specified for the manufacture of sheets metal components by their vendors were CRC/HRC Sheets and that accordingly the components/tractor parts supplied by their vendors were manufactured out of CRC/HRC sheets and that they had not received any component manufactured out of GP Sheets.

3.7 From the enquiries caused from SAIL, the main manufacturer of GP Sheets it was observed that GP Sheets/ Coils were not suitable for manufacture of auto components; that they had been manufacturing different grades of HRICR Sheets/ Coils for specific use in a particular product keeping in view the requirement of the industry and it was not possible to interchange the material of one grade with another for use in the manufacture of a particular product and that it was for this reason that the OE manufacturers had laid down specifications of the material to be used in the manufacture of OE parts by the vendors. That GP Sheets were neither manufactured by SAIL for use in the manufacture of OE Parts nor it was specified by the OE manufacturers for this purpose.

3.8 It was further observed that the Appellants had not taken any Modvat Credit on the documents of GP Sheet from July 1999 onwards whereas the OE parts manufactured and supplied by them to the OE manufacturer continued to remain the same suggesting that after the investigations about the fraudulent availment of Modvat credit by the vendors was taken up by the Department, the Appellants stopped taking Modvat Credit on documents of GP Sheets.

3.9 In view of the above it was alleged that they had fraudulently availed Modvat Credit of Rs. 3,44,398/- 113.575 MT of G.P. Sheets during the period Feb. 1997 to May 1999 without actually using these in the manufacture of O.E. parts; that the OE manufacturers for whom Appellants had been manufacturing OE J~art~ that the Appellants had declared HR Sheets, CR Sheets and GP Sheets

~.c~mlOOOst others as the inputs for the manufacture of OE parts in the Modavt If'", ' declaration filed under Rule 57 G of the Rules, but on enquiries it was found that l !;); they had not used G.P. sheets in the manufacture of OE Parts. And that ~ -;,,, moreover, they have not given any evidence to show that GP sheets on which -!v rModv~t Credit was availed by them was actually used in manufacture of their final

o_od r That the amount of Modvat credit so taken was utilised by them for discharging the duty liability on their final products which is in contravention of provisions of Rules 57 A and 57G of the Rules. That they had mis-declared and suppressed the material facts stated above with an intent to evade payment of Central Excise duty by way of availing inadmissible Modvat credit of Rs. 3,44,398/­ and hence, the provisions of erstwhile Rule 57-1 (1 )(ii) of the Rules read with Section 11 A of the Central Excise Act, 1944 (here-in-after called the Act) for invoking extended period for raising demand of Central Excise duty were attracted by this Act, they had rendered themselves liable for penal action under erstwhile Rule 57-1(4) and 173(Q)(1)(bb) of the Rules read with Section 11AC of the Act.

File NO.APPL-COMMOCEXl930/2019-GST - APL-CHD

4. Accordingly, for contravention of the provisions of Rule 57 A and 57G of the Rules in as much as that they had fraudulently availed Modvat Credit amounting to Rs. 3,44,398/- during the period from Feb. 1997 to May 1999 on Galvanized Plain sheet!Coil (in short GP Sheet! Coil) which was not used in the manufacture of OE Parts a Show-Cause-Notice was issued to the Appellants proposing there under recovery of the wrongly availed Modvat Credit under the provisions of Rule 57-1 (1 )(ii) read with section 11A of the Act by invoking extended period of time limitation along with interest chargeable under Rule 57-1 (5) of the Rules of the material time read with Section 11-AB of the Act. Penalty under erstwhile Rule 57- 1 (4), 173-Q(1 )(bb) read with Section 11-AC of the Act was also proposed to be imposed.

5. The relevant Order-In-Original No. 62/CE/ADC(Adj)/2010-11 dated 31.03.2011 (hereinafter called the impugned order) whereunder the demand was confirmed and equal penalty was imposed by the Add!. Commissioner(Audit), Erstwhile Central Excise Commissionerate, Chandigarh-l (hereinafter referred to as the Adjudicating Authority).

6. Feeling aggrieved the Appellants preferred an appeal with the Commissioner (Appeals) on 06.07.2011 on the grounds, interalia given as under:-

6.1 That both show cause notice and impugned order is based upon the investigations conducted from the dealers, SAIL officials and Tractor Manufacturers; that the Appellants requested for cross-examination of dealers, SAIL officials and manufacturers of Tractors to whom OE parts were supplied which was declined by stating it as an afterthought; that the cross-examination of different persons was very vital as the department has recorded the statement and got the opinion as per their suitability and convenience which needed further clarification. The Appellants had again requested that Hon'ble Commissioner (A) may grant opportunity of cross examination of concerned persons.

6.2 That opinion taken from HMT officials and SAIL officials could not be relied ~p.:_~Q__~ecause no person had ever said that the Appellant had not manufactured

/(~\\'"'OE:'~rts from GP sheets; that the opinions given by them were general in nature it:. and that nobody stated that OE parts could not be manufactured by GP sheets/no ('~.[, one had specifically said that GP sheets cannot be used for manufacture of OE ':\:.. Parts and that they were not corroborated by direct and specific evidences. That

, no statement under Section 14 of the CEA, 1944 was recorded and that thus, '.Q_p_i_!1ions could not be relied upon.

6.3 That the demand was confirmed by invoking extended period of limitation by alleging that GP sheets could not be used for manufacturing of OE parts; that the Appellants failed to prove that GP sheets were actually used in the manufacturing of OE parts and that thus, GP sheets were procured and were cleared clandestinely without payment of duty. And that in this way, the Appellants fraudulently took the modvat credit on GP sheets and suppressed the material information from the department.

6.4 That for invoking extended period of limitation, intention to evade duty must be there with suppression of facts; that without malafide intention, there can be no suppression of facts; that intention to evade duty is an integral and most relevant ingredient for invoking extended period of limitation. That intention to evade duty

File No.APPL-COMMOCEXl930/2019-GST - APL-CHD

has not been proved; that both GP sheets and CR sheets were subject to payment of duty and modvat credit on both the sheets were available and during the relevant time, price difference between GP sheets and CR sheets was low; that thus, in this condition, it is hyper imaginary that the Appellants had purchased GP sheets on payment of duty and thereafter removed clandestinely in grey market and that thereafter, CR sheets were purchased from open market without payment of duty and used in manufacturing of OE parts. That it was hard to believe that without much economic gain, the Appellants were involved in such a modus operandi, especially when no proof of clandestine removal of GP sheets and purchase of duty free CR sheets was ever adduced by the Respondent department.

6.5 That the whole case of the department was based on the presumption that GP sheets could not be used to manufacture OE parts and thus, the Appellants had fraudulently availed the modvat credit of GP sheets. That the Appellants at the time of hearing, showed OE parts which were manufactured from the GP sheets and further, requested the Adjudicating Authority to visit the factory premises of the Appellants; that GP sheets were actually used in the manufacturing of OE parts and that there was no fraudulent activity ever done by the Appellants to take inadmissible modvat credit.

6.6 That all the information required under the Rules, were duly supplied to the department and not even a single fact was suppressed from the department which was evident from the following facts:

i) That the Modvat declaration dated 03/02/1997, as stipulated under Rule 57G of erstwhile Rule showing sheet falling under Sub-heading 7210.19 (which also covers GP sheet) as an input has been filed which was duly acknowledged by the department. Had the department any doubt regarding taking Modvat credit on GP sheet, the Appellants could have been asked for clarification.

That as per Rule 57G (8), periodical returns RT-12 alongwith RG 2,3A Part I and II indicating availment of Modvat Credit on GP sheet had been submitted for five years, consecutively and that the said returns had been duly assessed after scrutiny of RG-23A Part I and II which contained full details of quantity of GP sheet received and utilized and how much credit had been taken on GP sheets.

Further, that the original duty paying documents in original l.e. Duplicate/Transporter copy of invoices on the basis of which modvat credit on GP sheet was availed were also submitted to the department alongwith the RT-12 return which in terms of Rules were duly defaced and returned by the Range Officer and that perusal thereof revealed that each of them contained full particulars and description of input thereon had been mentioned as GP sheet which had been defaced by the Range Superintendent under his signature and seal which read as 'Modvat Credit Availed'.

iv) Further, that it was stipulated that manufacturer of final product shall submit within five days after the close of each month to the

File No.APPL-COMMOCEXl930/2019-GST - APL-CHD

Superintendent of Central Excise, the original documents evidencing payment of duty, alongwith extracts of Part-I and II of RG-23A every month and the Superintendent shall after verifying the genuineness of the documents, deface such documents and return the same to the party. That the Appellants had been submitting the said periodical return RT-12 alongwith RG23 abstracts and that the Superintendent had defaced all documents without asking for any other documents.

6.7 That it was not a case of self assessment as per current Rules, but it was a case of assessment by the Superintendent subject to verification of each and every documents. That thus, the Appellants could' not suppress any information from the department. That the information which were not required under the Rule and were not asked by the Superintendent, were not supplied which could not be taken at par with suppression of facts. That the Appellants were not supposed to submit drawing or specification of the buyers or OE parts and same were not submitted to the department which could not be taken at par with suppression of facts.

6.8 That moreover, the period involved in the case was Feb. 1997 to May 1999 and factory premises were visited by the departmental officers in 1999 whereas show cause notice was issued in 2002 which is after the expiry of six months. That Show- cause-notice beyond six month from the date of knowledge of the offence was time barred and not sustainable.

6.9 That in the impugned order, it was held that documents on which modvat credit was taken were incomplete and had shown the description as 'Sheet' not GP sheet which was a clear case of mis-declaration and suppression; that it was very technical in nature to know the fact that OE parts could not be manufactured fr~ GP sheets, That the adjudicating authority did not consider the fact that QOcuments 'on which credit was taken was issued by the dealer and not by the

,7Appellants. That in the statement of the dealers, it was not stated that incomplete ( information was given in the invoices on the instructions from the Appellants; that , thus, any lapse in the invoices if any was due to negligence of the dealer and the

ppellants had no role in this.

6.1()~-Tnat the entire demand was confirmed on presumptions and surmises and without any corroborative evidence that it was presumed that GP sheets on which modvat credit was taken, were removed clandestinely in Grey Market and CRlHR sheets were purchased without payment of duty from grey market. That there was no single evidence in support of this presumption that to whom GP sheets were sold and from whom CR sheets were purchased. That no corroborative materials evidencing the illegitimate clearance and purchase was placed and that without any corroborative evidence, demand was not sustainable. That there were number of judgments on the issue that clandestine activities by the assessee has to be established by the department by producing cogent,convincing and tangible evidence and same cannot be based upon assumption and presumption. That GP sheets were duly received by the Appellants was not a disputed fact; that allegation merely on presumptions that GP sheets have been clandestinely removed and CR sheets have been clandestinely purchased was not sustainable.

File No.APPL-COMMOCEXl930/2019-GST- APL-CHD

That assumption and Presumption however strong could not be substituted with proof/evidence.

6.11 That the adjudicating authority held that initial burden lies upon the department to prove the allegation. Whereas, the department is failed to discharge the burden that to whom GP sheets were clandestinely removed if not used in manufacturing of OE parts and from whom, CR sheets have been purchased. The department alleged that the Appellants were involved in such malicious modus operandi for last few years but no evidence, statement or enquiry was ever conducted to discharge the initial burden. Thus, just by alleging the clandestine removal and purchase, demand is not sustainable.

6.12 That entire case of the department was based on one allegation mainly that OE parts could not be manufactured from GP sheets; that the parts which can be manufactured from CR sheets, same can be manufactured from GP sheets. That the Appellants were engaged in manufacture of Tractor Parts which were generally painted with the paint which included paint based on ceramic or other according to requirement. That before, undergoing the process of painting, the unfinished goods/parts undergo the process of cleaning which lead to de-rusting by Sulphuric acid and Oil Burning. That during the said process galvanization/coating of zinc on the GP sheet was either separated due to chemical reaction of the sulphuric acid or burned/melted or merged with other waste material due to high temperature and that in the process, the base material of the GP sheet emerged which was CR sheet on which coating of paint was carried out to have finished product. That it is pertinent to mention that GP sheet was nothing else but galvanized/coated CR/HR sheet.That the contention is supported with investigation conducted from SAIL. That a simple process of dipping the GP sheet into the sulphuric acid, the zinc coating thereon disappears or vanishes and there again CR sheet emerged and that to confirm this view, cross examination of SAIL officers was requested because this fact was never asked nor disclosed when his opinion was taken by the department. That Tractor parts were not exclusively manufactured from the GP sheet but the same could be ~s~d) "by mixing with the CR/HR sheet to manufacture the said parts. That

(

t~e~eaft~r, once a co.mponent part was manufactured, it was next to impossible to distinquish as to which part was manufactured from the GP sheet or CR sheet because the base material of the GP sheet was also the CR sheet. That to

\ ascertain these facts, it was again requested that SAIL officers be summoned for cross-examination.

"'" 6.13- That the adjudicating authority has mis-interpreted the reply while deciding the issue, that it was held that no prudent man would purchase Galvanized sheet and then after de-galvanisation would put to use in the manufacturing, especially when CR sheets were available in the market. In this regard, it was submitted that no separate/special process was undertaken by the Appellants to de-galavnize the sheet; that the parts manufactured by the Appellants were subject to paint and in every case of painting the part, the parts were dipped in sulphuric acid for cleaning purpose and that in this process, GP sheets were de-galvanised. That no cost was incurred by the Appellants to de-galvanize the parts and no separate process was undertaken.

File NO.APPL·COMMOCEXl930/2019·GST· APL·CHD

6.14 That in the impugned order, it has been held that the Appellants had received GP sheets having thickness less than 1 mm whereas HMT had specified sheet having thickness 1.2 mm or above and that thus, GP sheets having thickness less than 1.2 mm were not suitable for OE parts. That it was factually incorrect that HMT did not specify any part having thickness less than 1 mm and that the Appellants had drawings in some cases where thickness was specified as less than 1 mm. That moreover, thickness had no relevancy in the instant case because it was not mentioned on the invoices. Reliance has been placed on the judgment of Hon'ble Bombay High Court in case of CCE, Mumbai-III Vs Basant Rubber Factory Ltd. reported as 2011 (264) EL T 16 (BOM).

6.15 That for the sake of argument, even if it is presumed that the Appellants were involved in such a modus operandi, even then there could be very low economic gain to the Appellants because price difference between GP sheet and CR sheet was very small. That the Appellants used GP sheet in the manufacturing of OE parts because of shortage of CR/HR sheets in the market. That it was imaginary that for small benefit, the Appellants were involved in such illegal activities, especially when the Appellants were to bear transportation and loading/unloading expenses at every stage right from the purchase of GP sheet from the dealer to the clandestine removal of GP sheet in grey market and purchase of CR sheet from grey market without payment of duty and that thus, modvat credit benefit would also reduce on incurring such expenses.

6.16 That in the past, since inception of factory of the Appellants, no offence/case on account of clandestine removal or purchase of inputs or shortage or excess was ever booked against the Appellants. That right from first day of working, the Appellants were registered under the Act and considering the neat track record, it was also not maintainable and reasonable to allege without any corroborative evidence.

6.17 That to confirm the demand and to substantiate the allegation, advertisement of the SAIL has been relied upon which is very surprising. That Advertisement is no source or evidence to be relied upon. That in the said advertisement, usage of various forms of Steel Sheets was mentioned and GP Sheet was not mentioned as suitable for auto parts. That the actual question was whether GP Sheet could be used for the manufacture of OE parts or not and not that whether GP Sheet were suitable or not for manufacture of auto parts. That thus, relied upon advertisement was misconceived inasmuch as no advertisement

"'" / c'ould be assumed as 100% correct and true.

6.18 That as it is evident that demand was not sustainable on merits and limitation and that thus, interest was not chargeable and penalty was not imposable.

7. Personal hearing in the case was held on 07.06.2019. Sh. Naveen Bindal, Advocate and Authorized Representative on behalf of the Appellants appeared for personal hearing in the case of Zeto Engineers Pvt. Ltd., Case File No. 69/18-19 reiterated the submissions as made in their grounds of Appeal and further brought on record CESTAT, Delhi, Final order dated 05.05.2014 in the case of MIs Silence Auto Vs Commissioner of Central Excise, Chandigarh and CESTAT, Chandigarh,

File No.APPL·COMMOCEXl930/2019·GST· APL·CHD

Final Order dated 05.04.2017 in the case of Grewal Enterprises, decided in their favour on the similar issue and requested to decide the case in the light of these.

8. I have carefully gone through the facts of the case, grounds of appeal, submissions made at the time of personal hearing and documents placed on record and find that the issue to be decided before me is that whether the benefit of CENVAT Credit of the duty paid on GP sheets not specified for the manufacture of their finished goods i.e. motor vehicle/tractor parts was admissible to the appellants?

8.1 I find the Appellants were engaged in the manufacture of motor vehicle/tractor parts which were supplied to various tractor and motor vehicle manufacturers and availed MODVAT Credit on the GP Sheets, stated to have been used in the manufacture of motor vehicles/ tractor parts. However, contrary to this the vehicle manufacturers who procured these motor vehicle/tractor parts stated that the main raw-material specified for Sheet Metal Components by their vendors were CRC/HRC Sheets (and not GP sheets, on which the appellants availed credit); that the components/tractor parts supplied by their vendors were manufactured out of CRC/HRC Sheets and not GP sheets; that quality control checks at their or vendor's end were carried out to verify that the components were strictly as per drawings/specification given by them and that they had not received any components manufactured out of GP Sheet from their vendors (the Appellants). Even the Steel Authority of India Ltd (SAIL), the largest manufacturer of GP Sheets/Coil had categorically stated that GP sheets/coils were not suitable for manufacture of auto components.

8.2 From the above I conclude that GP sheets claimed to have been used in the manufacture of motor vehicle/ tractor components were not used in the manufacture of auto components and tractor parts, and thus, MODVAT on GP Sheet which was not an input used in the manufacture of their final product was not admissible to the appellants.

8:3~ The Appellants have placed reliance on the CESTAT, Delhi judgment in the

#7 case of M/s Silence Auto vs Commissioner of Central Excise, Chandigarh and '(is: CESTAT, Chandigarh, Final Order dated 05.04.2017 in the case of Grewal (: _, Enterprises I find that the observation of the Hon'ble CEST A T that the department ~ ~ 0 had adjudicated the case against the Appellants on the basis of surmises and

conjectures is not in consonance with the judgments of the Hon'ble High Courts :"'a:nd Hon'ble Tribunals in various instances. In the case of COMMISSIONER OF CUSTOMS, PATNA Versus GHANSHYAM PRASAD GUPTA; 2011 (266) E.L.T. 448 (Pat.); Gulabchand Silk Mills Pvt. Ltd. V. CeE, Hyderabad-II- 2005 (184) 263 (Tri.-Bang.); UJWAL ISPAT PVT. LTD Versus COMMISSIONER OF CUS. & C. EX., NAGPUR: 2007 (218) F.L.T. 221 (Tri. - Mumbai) etc. It has by and large been stated that: -

In any type of clandestine activity, the persons try their best not to leave any evidence, therefore, such persons cannot be expected to faithfully put the details of all such clearances in some register and append their signature - Hence, clandestine activity at best can be established only by circumstantial evidence and it will be humanly impossible to establish every link in the chain of

File No.APPL-COMMOCEXl930/2019-GST - APL-CHD

clandestine activity without any break -Admissions/Statements having been supported by the recovery of non-duty paid goods as well as incriminating documents, such admission does not need further corroboration.

8.4 Further, in the case of COLLECTOR OF CUSTOMS MADRAS AND OTHERS Versus D. BHOORMULL {1983 (13) E.L.T. 1546 (S.C.), Hon'ble Supreme Court has stated that it cannot be disputed that in proceedings for imposing penalties under Clause (8) of Section 167 of the Sea Customs Act, to which Section 178A does not apply, the burden of proving that the goods are smuggled goods is on the Department. But in order to appreciate the scope and nature of the onus cast by it, due regard must be paid to other kindred principles, no less fundamental of universal application. One of them being that the prosecution or the Department is not required to prove its case with mathematical precision, but what is required is the establishment of such a degree of probability that a prudent man may on its basis believe in the existence of the facts in issue.

8.5 Suppression of production as borne out by records maintained by assessee amounts to initial discharge of burden by Department and the onus shifts to manufacturer to prove that entries in records are not relating to manufacture and removal of goods.

8.6 Further, in the case of SAl CHEMICALS PVT. LTD. Versus COMMISSIONER OF C. EX., RAIPUR; 2010 (257) E.L.T. 457 (Tri. - Del.) it has been held that absence of investigation with buyers or evidence on electricity consumption cannot be fatal as quality of evidence relevant and not quantity of evidence. Corroborative evidence is not required once basic facts are not disputed.

8.7 In view of the above I find that in the instant case the department had established their case beyond all reasonable doubt based on the statements of the buyers of the impugned goods and the expert opinion of Mis SAIL a largest manufacturer of Steel and that confirmation of demand alongwith interest and imposition of penalty by the adjudication authority is appropriate.

ORDER

9. In wake of the above I uphold the impugned order and reject the appeal filed by the Appellants. Accordingly, the appeal stands disposed of.

REGD. A.D.

Digitally signed by SUMAN BALA Date:Fri Nov 15 16:0 :39 1ST 2019 Reason :Approved

(Dr.Sun{ I at:! 1 Commissioner (Appeals)

Mis Zeto Engineers Pvt. Ltd.Unit-ll, Industrial Area, Phase-I, Chandigarh.

COpy to:

The Chief Commissioner, Goods and Service Tax Zone, Chandigarh. The Commissioner, CGST and Central Excise Commissionerate, Chandigarh. ..-:®- .•...... \ The Assistant Commissioner, Central Excise Divisio~handigarh. Naveen Bindal, Advocate, No. 2307/1, Sector 38 C, Chandigarh. Guard File.

- File No.APPL-COMMOCEXl930/2019-GST - APL-CHD

i. ii.

iii. iv. v.

yv? Superintendent (Appeals)